Commercial property landlords may be prepared to offer some form of concession or incentive to encourage prospective tenants to sign a new lease or convince an existing tenant to extend their current lease. Commercial lease incentives have become an integral factor in the negotiation stage for new or extended leases.

In fact, commercial lease incentives are a useful bargaining tool for landlords, particularly in a market that favours the tenants. This may be because supply has outstripped demand and tenants have greater choice to look elsewhere if they wish. In addition, some existing tenants may be investing some of their own hard-earned revenue into the property which has helped to appreciate the value of said property.

The most popular commercial lease incentives explained

Incentives and concessions for commercial property leases come in various shapes and sizes, depending on the market conditions at the time. If you’re wondering what kind of incentives you should be looking for as a first-time commercial tenant, or you’re an existing tenant wondering what kinds of concessions you could get elsewhere with another landlord, check out these four common commercial lease incentives.

Fit-out property deals

Some commercial property landlords will commit to fitting out your new workspace, tailored to your specific needs. It is usually described as a ‘contribution’ or ‘discount’ of the fit-out – such as the installation of new fixtures, fittings, appliances and aesthetics. In most cases, tenants will cover the costs initially and then file for a reimbursement of a percentage of costs from their landlord rather than taking a rent-free period or rent abatement.

Landlords will often agree to reimburse their tenants so long as they’ve signed the lease and provided detailed quotes for the work required – and covered the work with sufficient insurance.

Rent abatements

Some fortunate commercial property tenants can lock in a rent abatement with a landlord. This acts as a reduced rent lease, spread out across the entirety of (or part of) the lease term. It is often displayed as a percentage discount. With cashflow increasingly important to property landlords, those tenants that require less of a fiscal boost upfront may be offered attractive rent abatements across the full period of the lease.

Rent-free periods

Instead of a rent abatement or discount across the entirety of a lease term, it may be possible to lock in a period where you don’t pay a penny in rent. Rent-free periods often commence from the start of the lease, giving you a set number of months rent-free. This can be particularly useful to help you business get its house in order before you need to worry about covering the lease. A commercial lease with a six-month rent-free period at the start of a five-year lease, with monthly rents of £5,000 would save firms £30,000 in rent over the course of that initial six months. Money that could be invested into driving the initial growth of the business or enhancing the property to drive productivity.

Short-term leases

If you’re unsure whether a long-term lease is a sensible option for your business, consider if your landlord will offer a short-term letting arrangement. Naturally, this gives the landlord much less security long term, but if it acts as a useful period to ‘prove’ your business model and then take on a lengthier lease, it’s a move they are often prepared to take.

If you are looking to get the best value from your next commercial property deal, at Pall Mall Estates we offer a host of commercial property incentives. Whether you’re looking to expand, relocate or even consolidate, we can give your business the leg up you need.

Check out our latest commercial property incentives spanning light industrial and workshop spaces through to retail and office units.

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